Experts Foresee Huge Impact From Crackdown

Everyone across Cambodia’s economic spectrum—from liquor importers to prostitutes—was in a holding pattern Thursday, wondering how an order issued by  Prime Minister Hun Sen three days ago to close entertainment spots will affect them.

The economic impact of Hun Sen’s order, dictating that all karaoke parlors, discotheques and nightclubs be closed by 6 tonight, is difficult to calculate right now, experts say. But a sustained closing of entertainment spots would mean the loss of countless jobs, thousands of dollars in government revenue, and would be a major blow to the country’s top alcohol distributors.

“Tens of thousands of jobs are on the line—directly,” said Tim Smyth, managing director of Indochina Research. “And thousands are on the line indirectly.”

Night spots provide jobs for waitresses and other staff. They also provide work for distribution companies and their staff, truck drivers and other retail personnel.

Even the police earn extra income from the hundreds of clubs that pay bribes to keep operations running smoothly.

“If this thing does stick—and I just don’t see that happening,” Smyth said, the heaviest-hit in­dustries will be alcohol and tobacco, two of Cambodia’s lar­gest.

Distributors face losing 30 percent to 40 percent of their outlets, Smyth said.

“It’s a double whammy,” he said. First, they lose their outlets. Second, the goods that are sold in night spots are “premium product,” which bring a higher profit.

The government, which collects a 13 percent tax on liquor and a 7 percent tax on cigarettes and beer, also looks like a loser.

The Ministry of Commerce’s tax department does not have any specific figures for revenue collected from the excise and value added taxes on liquor and cigarettes, according to Um Seiha, deputy director of the department.

“We haven’t studied that,” he said.

Millions of dollars worth of liquor, beer and cigarettes are legally imported into Cambodia each year. An unknown amount come through the country’s porous borders.

Figures from CamControl, the government’s customs agency, show that from January through October of this year, nearly $6 million in liquor and beer were imported legally into Cambodia. Under the excise tax laws, the government should have collected about $650,000 on those imports.

For the first 10 months of this year, liquor imports were valued at $3,854,219. Based on a 13 percent excise tax, the government should have collected $501,048.47. Beer imports were valued at $2,120,374. With a 7 percent excise tax, the government should have collected $148,426.18.

Value added tax is impossible to calculate, Smyth said, because many retail outlets do not have a registration number yet and do not pay the tax.

Most distributors of both imported and locally canned alcoholic beverages have not changed the way they do business.

“It’s too early for us to know. Wait and see,” said Tet Sing, general manager of CamBrew Co and Angkor Beverage Co, which distributes Angkor beer. “We want to wait until it goes into effect,” added Sing, who is also the president of the Malaysian business club.

Peter Ong, general manager of Cambodia Brewery Ltd, which distributes both Tiger and Anchor beer brands, and will likely be hit hard by sustained closures, declined to comment.

Another large distributor, speaking on conditions of anonymity, said he was worried about a 30 percent loss of his outlets for imported beer. There was some concern for the people who were dependent on their products for their livelihood, he said.

Other investors were likely to be angered by the move because “Cambodia is known for these [illicit] activities,” he said, referring to karoake parlors being used as fronts for prostitution, “and a lot of [investors] put in money.”

 

 

Related Stories

Latest News

The Weekly DispatchA new weekly newsletter from The Cambodia Daily delivering news, analysis and opinion to your inbox. Published every Friday at 11:30am. Sign up today.